Djibouti Pays KenGen: $1M Offer on a Five-Year Geothermal Drilling Debt

Djibouti Pays KenGen: A $1 Million Offer on a Five-Year-Old Geothermal Drilling Debt

Djibouti has finally moved to pay part of what it owes Kenya Electricity Generating Company (KenGen) for drilling work done near Lake Assal. The amount is small next to KenGen's balance sheet. What it says about selling geothermal drilling services across Africa matters a lot more.

KenGen's latest annual report says Djibouti's state geothermal agency, the Office Djiboutien de Développement de l'Énergie Géothermique (ODDEG), has offered a first instalment of about $1 million (Sh129 million) against outstanding invoices of $2.13 million (Sh276.03 million), according to Business Daily. "ODDEG has acknowledged the debt and has proposed an initial payment of $1 million as the first instalment towards settlement," KenGen said in the report.

KenGen is Kenya's largest power producer, with about 54% of the market. The Kenyan government owns 70% of the company and the public holds the other 30% through shares listed on the Nairobi Securities Exchange, The Rio Times notes. That makes this a story about a Kenyan state company collecting from another government's agency, and about how a listed utility handles credit risk outside its home market.

The debt goes back to a 2021 contract. Between then and now, KenGen's foreign drilling income has fallen sharply, Kenya's Auditor-General has warned about weak contract terms, and the company has named a new chief executive. This article covers what happened, why it took so long, and what it means for Africa's leading geothermal developer as it tries to sell its Olkaria expertise abroad.

The Numbers Behind the Djibouti Debt

The exact figures matter, because they show how much KenGen will actually recover.

According to The Rio Times, which reviewed KenGen's integrated annual report for the year to 30 June 2026, ODDEG proposed an initial payment of $1,000,585 against outstanding invoices of $2,126,128. Chief executive Peter Njenga signed the management note on 4 September 2026.

Even if the first instalment arrives, about $1.13 million will still be unpaid. KenGen has not said when ODDEG will pay, whether the offer has been formally accepted, or how the rest will be settled, The Rio Times reports.

So this is an offer of a first payment, not a settlement. Still, after five years of unpaid invoices, a written acknowledgement of the debt and a concrete number count as progress.

How KenGen Ended Up Drilling in Djibouti

The Djibouti contract was a milestone for KenGen's plan to export drilling services. In February 2021, ODDEG awarded KenGen a contract worth $6.45 million to drill three geothermal wells at the Galla Le Koma field, Business Daily notes. A World Bank project document records the same figure, describing a $6.45 million contract signed between KenGen and ODDEG in February 2021 to drill additional wells.

Galla Le Koma lies in the Lake Assal region, Djibouti's most studied geothermal area. The wells were meant to feed a 15 MW pilot power plant, and the African Development Bank has lent $24.73 million for the wider Lake Assal programme since 2013. The Kuwait Fund for Arab Economic Development also signed a $27 million loan for the Gale-Le-Koma project. That loan covered ten wells (eight production and two reinjection) and a 15 MW plant originally targeted for 2021.

KenGen announced on 25 November 2021 that it had started drilling the first well, The Rio Times notes. By June 2023, President William Ruto said KenGen had completed phase one of its ODDEG contract and drilled one geothermal well in the first phase of the Galla Le Koma project, KBC reported. At the same visit, Kenya and Djibouti signed an energy cooperation MoU under which KenGen would drill two more wells for the proposed Hanlé-Garabbayis project.

ODDEG says a deep well was drilled at Galla-Le-Koma in November 2022 to about 1,450 metres, according to Innovando News. KenGen's latest annual report says its drilling work in both Ethiopia and Djibouti has now ended, Business Daily reports.

Why the Debt Took Five Years to Move

Late payment from Djibouti is not a one-off. The Auditor-General flagged it as part of a wider receivables problem.

In her review of KenGen's 2025 accounts, Auditor-General Nancy Gathungu found that receivables from non-commercial clients had reached Sh1.27 billion, up from Sh982.42 million. Provisions against them rose 76.9% to Sh545 million, Business Daily reported. Two firms, including a foreign entity, owed Sh890 million of that overdue balance. The Rio Times gives the figure as Sh850 million owed by two foreign firms, about 70% of the overdue total. The report does not name either firm.

Her explanation was blunt: "The extended outstanding receivables are attributed to weak contractual terms with clients which do not sufficiently safeguard timely payment."

The audit named the Djibouti engagement directly. It noted that the Djibouti government, through its embassy in Kenya, had reaffirmed its commitment to pay once donor funds were released. But "the existence of an effective enforcement mechanism of payment and debt recovery strategies could not be confirmed," Business Daily reported.

That detail about donor funds explains a lot. Djibouti's geothermal programme runs largely on concessional lending and grants from the African Development Bank, the World Bank, the Kuwait Fund and the Geothermal Risk Mitigation Facility (GRMF). When contractor payments depend on donor money arriving, the contractor's cash flow depends on the donor's timetable, the client's procurement process and the project's progress. A service provider has little control over any of these.

For anyone structuring geothermal deals in Africa, the lesson is familiar: payment terms need to be enforceable from the start. Escrow accounts, letters of credit, payment guarantees, interest on late invoices and clear dispute-resolution clauses are basic protections, not bureaucracy.

Djibouti Is Not KenGen's Only Collection Problem

Djibouti's debt looks small next to what KenGen's main customer owes. As of June 2025, Kenya Power owed KenGen Sh16.65 billion and was paying in about 113 days on average, against an agreed 40-day credit period, according to Eastleigh Voice. Total impairment provisions reached Sh1.37 billion in the 2025 financial year, with Sh830.99 million set aside for Kenya Power alone.

This is the context for KenGen's diversification strategy. Selling all its power to one financially stretched buyer is a structural risk. KenGen is now looking at selling power directly to industrial users at the Olkaria Green Energy Park, The Standard's TNX Africa reported. Exporting drilling services was supposed to be another way to earn money outside Kenya Power. Djibouti shows that foreign clients can carry their own collection risk.

KenGen's Shrinking Regional Drilling Revenue

KenGen's diversification revenue, which covers drilling and consultancy services, fell to Sh122.1 million in the year to June 2026. It was Sh263.6 million in 2025 and Sh759.2 million in 2024, according to Business Daily.

The drop is steeper when compared with the peak. In the year to June 2021, drilling at Tulu Moye in Ethiopia brought in Sh1.784 billion, up from Sh440 million the year before, according to KenGen's FY2021 results release. In other words, income from drilling and consultancy has fallen by more than 90% in five years.

KenGen's regional portfolio has still been significant. It includes 10 wells in the first phase of Ethiopia's Aluto geothermal project, geoscientific consultancy in Eswatini and drilling in Tanzania, Business Daily notes. In Ethiopia, KenGen and Shandong Kerui Oilfield Service Group won a $76.8 million drilling contract, financed by the World Bank, for the 70 MW Aluto-Langano project, according to ThinkGeoEnergy.

The problem is that drilling contracts end. When rigs are demobilised, revenue stops unless a new contract is ready. KenGen's 2024 accounts included Sh503 million in drilling costs for Ethiopia and Djibouti, mostly for demobilising equipment from Ethiopia, according to a copy of the 2024 integrated report.

KenGen says it is "pursuing opportunities in the region and beyond, with ongoing negotiations for drilling and geoscientific works in Djibouti and Zambia," Business Daily reports. It may seem odd to negotiate new work in Djibouti while old invoices are still unpaid. It also suggests both sides want to keep working together, and the $1 million offer may be partly meant to clear the way for that.

What It Means for KenGen's Finances

In the context of KenGen's overall results, the Djibouti payment is modest. Revenue rose 6.4% to Sh59.7 billion in the year to June 2026, while profit after tax fell 1.2% to Sh10.35 billion. The board proposed a final dividend of Sh0.75 per share, down from Sh0.90, according to The Rio Times. The $1 million offer equals about 0.2% of annual revenue.

The materiality comes from three other factors:

Provision write-backs. If the Djibouti receivable is covered by the Sh545 million provision, any cash recovered could reduce impairment charges and improve reported earnings.

Audit credibility. A recorded acknowledgement of the debt and a payment proposal give KenGen a concrete response to the Auditor-General's concern that no enforcement mechanism could be confirmed.

Commercial signalling. A record of collecting foreign debts strengthens KenGen's case when bidding for future drilling contracts and negotiating payment terms.

Djibouti's Geothermal Ambitions Need Reliable Partners

From Djibouti's side, the payment offer reflects how much the country still depends on outside drilling expertise as it tries to turn decades of exploration into electricity.

Djibouti's geothermal potential is often estimated at up to 1,000 MW, according to ThinkGeoEnergy. That is far more than the country needs. Yet none of it is on the grid. As of March 2025, more than 80% of Djibouti's electricity came from hydropower imported from Ethiopia, with a 60 MW private wind farm and about 60 MW of usable diesel capacity out of 120 MW nominal, Innovando News reports, citing World Bank data.

ODDEG is working on several fronts:

Six priority sites have been studied since 2015: Lac Abbé, Hanlé-Garabayis, Arta-Qiqleh, PK20-Ambado, Nord-Ouest-Asal and Galla-Le-Koma (Innovando News).

GRMF-backed projects worth more than $33 million, which ODDEG links to a prospective 170 MW of installed capacity (Innovando News).

The PK20-Ambado project, launched on 29 June 2026, which focuses on direct uses of geothermal heat (ODDEG).

The Red Sea Drilling Company (RSDC), a national drilling company meant to build local capacity and reduce reliance on foreign contractors (ThinkGeoEnergy).

A data-centre strategy. On 6 September 2026, ODDEG Director General Dr Kayad Moussa Ahmed proposed using demand from data centres to finance new geothermal capacity, building on Djibouti's 13 submarine cable systems (Innovando News).

Djibouti's strategic position adds to the stakes. It hosts Camp Lemonnier, the main US military base in the Horn of Africa, so foreign governments watch its finances and energy plans closely (The Rio Times).

The data-centre idea is especially relevant to the debt. Developers, financiers and hyperscale customers will want proof that Djibouti's institutions pay contractors on time. Settling the KenGen invoices is a small but visible way to show that.

A New CEO Inherits the Regional Strategy

The Djibouti news came days before a leadership change at KenGen. On 24 October 2026, the board named Eng. Ronoh Kibet Charles as Managing Director and CEO from 1 February 2027, succeeding Peter Njenga, who is retiring, Citizen Digital reported.

Kibet currently heads Commercial Services, overseeing energy markets, investments, new business and partnerships. The board credited him with helping expand KenGen's international consultancy services and the Olkaria Green Energy Park, Citizen Digital notes.

That makes him directly responsible for the issues the Djibouti case exposes. Rebuilding drilling revenue from Sh122.1 million, collecting the remaining $1.13 million, closing deals in Zambia and Djibouti, and writing contracts that pass the Auditor-General's review will all be on his desk.

Lessons for Africa's Geothermal Drilling Market

The KenGen-Djibouti case offers several lessons for anyone working in African geothermal development.

Technical skill does not guarantee payment. KenGen said in 2021 that it had drilled more than 300 wells at Olkaria (The Rio Times). The field is home to Africa's first geothermal power plant, whose first unit was commissioned in June 1981 (Business Daily). Drilling the wells well was not enough to get paid on time.

Donor-dependent projects create a chain of payment risk. When a client pays only after development-finance money arrives, delays at the funder become delays for the contractor. Contracts should name the funder, set out how disbursement works and provide a fallback.

Being a state-owned contractor brings diplomatic pressure. Collecting from another government's agency involves embassies, ministers and bilateral relations. That can help, but it can also slow down commercial enforcement.

The market is still growing. A Kenyan firm is reportedly ready to support geothermal work at Comoros' Karthala volcano, where three exploration wells and a 15 MW plant are planned, according to The Rio Times. Zambia, Ethiopia, Tanzania and Djibouti all need drilling capacity. Demand for East African geothermal expertise is rising, so the commercial terms behind it need to improve as well.

Conclusion

Djibouti's $1 million offer to KenGen is an acknowledgement, not a settlement. It covers less than half of $2.13 million in unpaid invoices, has no announced payment date and leaves about $1.13 million outstanding. Still, after five years, written audit warnings and rising provisions, it is the first real sign the debt will be recovered.

For KenGen, the episode shows both the potential and the risks of exporting Olkaria's expertise. The company has shown it can drill across the region. Under a new CEO from February 2027, it now needs to show it can write contracts that ensure it gets paid for that work.

For Djibouti, paying KenGen is part of building credibility. A country that wants geothermal steam to power its data centres, industry and households will need drillers, financiers and offtakers to trust that its contracts will be honoured.

source: Rio Times, Business Daily 

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